Korean property restrictions lifted in all areas but four

Real estate restrictions have been lifted in all areas except Seoul and Seongnam, Hannam and Gwangmyeong, all in Gyeonggi province. The adjustment comes as the number of transactions dropping and prices beginning to decline.

View of apartments in Suwon, Gyeonggi, one of the areas where restrictions have been lifted. [YONHAP]

Real estate restrictions have been lifted in all areas except Seoul and Seongnam, Hannam and Gwangmyeong, all in Gyeonggi province.

Restrictions, in place since 2017, have been lifted in Yongin, Suji and Dongtan in Gyeonggi Province, Incheon and Ansan.

The adjustment comes as the property market is Korea faces challenges, with the number of transactions dropping and prices beginning to decline.

“Due to rising interest costs and the conception that apartment prices have reached their peak, the sentiment on buying houses has weakened,” Finance Minister Choo Kyung-ho said at a government real estate meeting attended by Land Minister Won Hee-ryong and Financial Services Commission Chairman Kim Joo-hyun.

The change in the restrictions was announced at the meeting, which was held Thursday.

"Transactions have reached an all-time low,” Choo said. “Our goal is to soft land the real estate market while providing a stable supply in the long term."

The Bank of Korea has been raising rates steadily since August last year. From a historic low of 0.5 percent, the base rate has been lifted to 3 percent.

Another rate setting meeting, the last of the year, is set for this month, and the market is split on whether the base rate will be increased a quarter of a half point.

With money rapidly becoming more expensive, property prices are starting to decline after rising quickly in a speculative mania that gripped the country.

According to the government, Seoul apartment prices are up 106 percent since 2017. After peaking in October, the prices have fallen around 9 percent.

This is the second time that the government adjusted the areas being regulated. The government is hoping to encourage more transactions in areas where regulations have been lifted.

Under the restrictions, the loan-to-value ratio is limited to 40 percent for apartments appraised at 900 million won or less. That figure drops to 20 percent for those appraised at 900 million won or more. For apartments appraised are 1.5 billion won or more, no loans are provided.

A loophole allowing for a 50 percent loan-to-value ratio for first-time homebuyers regardless of the area will be implemented next month instead of next year. Loans for properties costing more than 1.5 billion won in restricted areas will again be allowed.

The government said it plans to provide 10 trillion won to support real estate project financing, an area of concern following the insolvency of a company related to the Legoland Korea project.

Funding will come through the state-owned Korea Housing & Urban Guarantee Corp.

“Except for the four areas — Seoul and cities close to Seoul, Seongnam, Hannam and Gwangmyeong — restrictions in all other places have been lifted,” Won said. “We took into account the increasing housing expenses due to the surge in interest rates and the difficulty of normal housing transactions due to the housing prices in the Seoul metropolitan area falling for 27 consecutive weeks.”

From second left to right, Finance Minister Choo Kyung-ho, Land Minister Won Hee-ryong and Financial Services Commission Chairman Kim Joo-hyun greets each other before the government's meeting on the real estate market at the government complex in Seoul on Thursday. [YONHAP]

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]